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The Federal Communications Commission's (FCC) Schools and Libraries Universal Service Support Mechanism--also known as the E-rate program--is a significant source of federal funding for information technology for schools and libraries, providing about $2 billion a year. As requested, GAO assessed issues related to the E-rate program's long-term goals, including (1) key trends in the demand for and use of E-rate funding and the implications of these trends; (2) the rate of program participation, participants' views on requirements, and FCC's actions to facilitate participation; and (3) FCC's performance goals and measures for the program and how they compare to key characteristics of successful goals and measures. To perform this work, GAO analyzed data going back to the first year of the program, surveyed a sample of participating schools and libraries, reviewed agency documents, and interviewed agency officials and program stakeholders.

Requests for E-rate funding consistently exceed the annual funding cap, and increased commitments for telecommunications and Internet services, combined with significant undisbursed funds, limit funding for wiring and components needed for data transmission. Although still exceeding available funds, total amounts requested have generally declined since 2002, largely due to declining requests for wiring and components. Funding commitments in recent years reflect this trend, with the amount of funding for wiring and components outweighed by funding for telecommunications services and Internet access. In addition, a significant amount of committed funds are not disbursed to program participants; for commitments made in 1998 through 2006, about one-quarter of the funds have not been disbursed. Unused funds are reallocated for use in future years but are still problematic because they preclude other applicants from being funded. Participation rates and participants' views on program requirements indicate difficulties in the E-rate application process, which FCC and the Universal Service Administrative Company (USAC)--the program's administrator--are taking steps to address. The participation rate among the more than 150,000 eligible schools and libraries is about 63 percent, but participation rates among groups vary, from 83 percent among public schools to 13 percent among private schools. According to nonparticipants, a key circumstance influencing nonparticipation is the complexity of program requirements, even though participants reported that participation is becoming easier. Still, E-rate program data show that some funding is denied because applicants do not correctly carry out application procedures. In recent years, FCC and USAC have made changes intended to ease the process of participation for schools and libraries, such as giving applicants an opportunity to correct clerical errors in their applications. FCC officials said they will consider further changes to facilitate participation, but their primary interest is in protecting funds from improper use. FCC does not have performance goals for the E-rate program, and its performance measures are inadequate. In 1998, GAO first recommended that FCC develop specific performance goals and measures for the E-rate program in accordance with the Government Performance and Results Act of 1993. FCC set forth specific goals and measures for some of the intervening years, but it does not currently have performance goals in place. Further, the performance measures it adopted in 2007 lack key characteristics of successful performance measures, such as being tied to program goals. Performance goals and measures are particularly important for the E-rate program, as they could help FCC make well-informed decisions about how to address trends in request for and use of funds. Without them, FCC is limited in its ability to efficiently identify and address problems with the E-rate program and better target funding to highest-priority uses. FCC's piecemeal approach to performance goals and measures indicates a lack of a strategic vision for the program.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: The Federal Communications Commission's (FCC) Schools and Libraries Universal Service Support Mechanism - also known as the E-rate program - is a significant source of federal funding for information technology for schools and libraries, providing about $2 billion a year. The E-rate program provides schools, school districts, libraries, and consortia with discounts on telecommunications services, Internet access, and data transmission wiring and components used for educational purposes - that is, activities that are integral, immediate, or proximate to the education of students or to the provision of services to library patrons, such as activities that occur on library or school property. In a 2009 report, we found that FCC's efforts in establishing performance goals and measures had progressed in a piecemeal manner, which indicted a lack of a coherent vision for the program. We also identified several trends that raised questions about the direction of the program. For example, in an increasingly broadband oriented world, a substantial and growing portion of program commitments were for telecommunications services such as local and cellular telephone service. Therefore, to better provide a foundation for effective management of the program and ensure that program funds are used efficiently and in a manner to support desired outcomes, we recommended that FCC review the purpose and structure of the program. On July 19, 2013, FCC adopted a Notice of Proposed Rulemaking (NPRM) that initiated a thorough review and modernization of the program built around three goals: increased broadband capacity, cost-effective purchasing, and streamlined program administration. In its NPRM, FCC noted that it was responding to GAO's recommendations. FCC Commissioner Pai also noted that the E-Rate program had evolved over the years and that FCC had lost sight of what was important, a sentiment consistent with our finding of a lack of a coherent vision for the program. Among other things, FCC sought comment on prioritizing funding for new fiber deployments that will drive higher speeds and long-term efficiency, ensuring that schools and libraries can access funding for modern high-speed Wi-Fi networks in classrooms and library buildings, increasing consortium and bulk buying opportunities to lower prices, and providing a streamlined electronic filing system. According to FCC, this effort will help to deliver students and teachers with access to high-capacity broadband nationwide.

Recommendation: To better provide a foundation for effective management of the E-rate program and to ensure that program funds are used efficiently and in a manner to support desired program outcomes, the Federal Communications Commission should review the purpose and structure of the E-rate program and prepare a report to the appropriate congressional committees identifying FCC's strategic vision for the program; this report should include the program's long-term goals, whether the vision can be achieved using the existing program structure (e.g., the priority rules and discount matrix), and whether legislative or regulatory changes are necessary.

Agency Affected: Federal Communications Commission

Status: Closed - Implemented

Comments: The Federal Communications Commission's (FCC) Schools and Libraries Universal Service Support Mechanism - commonly referred to as the E-rate program - is a significant source of federal support for technology funding for schools and libraries. E-rate is similar to a grant program in that schools and libraries apply annually for support and, if approved, receive discounts for eligible services actually received. The E-rate program funds telecommunications services (Priority 1 services), such as local, long distance, and wireless services, and internal connections (Priority 2 services), such as cabling, components, routers, switches, and network servers that are necessary to transport information. The E-rate program is capped at $2.25 billion a year. All eligible and properly completed requests for Priority 1 services are funded up to the available amount of funding; Priority 2 services are funded with what remains. In a 2009 report, we found that of the $19.5 billion in E-rate funding committed to schools and libraries between 1998 and 2006, $5.0 billion - more than one-quarter - was not disbursed. We found that undisbursed funding was problematic because it had the potential to reduce the number of participants that received commitments for Priority 2 services; in particular, some applicants for Priority 2 services, who would have received funding if aggregate requests and commitments were more consistent with actual disbursements, did not receive funding. Therefore, we recommended that FCC provide information on the amount of undisbursed funding associated with commitments that have expired, why these funds were not disbursed, and the actions taken to reduce the amount of undisbursed funding. In 2014, FCC asked the Universal Service Administrative Company (USAC) - the program's administrator - to develop information on undisbursed E-rate funding to be published as an addendum to USAC's most recent annual report and to be included in USAC's future annual reports. USAC published information on undisbursed funding, the reasons for undisbursed funding, and its actions to reduce undisbursed funding in its 2013 Annual Report. FCC's and USAC's actions should help reduced the instances whereby applicants are denied funding because of undisbursed funding.

Recommendation: To better provide a foundation for effective management of the E-rate program and to ensure that program funds are used efficiently and in a manner to support desired program outcomes, the Federal Communications Commission should provide information in its annual performance plan on (1) the amount of undisbursed funding associated with commitments that have expired and why these funds were not disbursed, and (2) the actions taken to reduce the amount of undisbursed funding and the outcomes associated with these actions.